Are Australia's new proposed country of origin laws going too far?
by Joe Lederman, Managing Principal of FoodLegal
The Australian political debate over statutory obligations for origin labelling of food has a long history.
The Blewett Panel in its ‘Labelling Logic’ (2011) Report on Australia’s food labelling laws had made recommendations for new mandatory obligations for Country of Origin labelling (‘CoOL’). However, apart from acceptance of one minor change, most of its CoOL recommendations were rejected by Australia’s Ministerial Forum on Food Regulation.
Subsequently, separate parliamentary committee enquiries in the Federal Senate (May 2014) and the Federal House of Representatives (October 2014) have also investigated ongoing consumers concerns with various aspects of food labelling.
In July 2015, the then Prime Minister Tony Abbott announced that the Australian Federal Government was considering a further review of CoOL and that a new framework would soon be released. On 4 December 2015, the government released for public comment a draft of the proposed new laws and amendments.
Key features of the proposed new CoOL regulatory framework include the following:
- A statement highlighting where the product was made, produced or grown;
- The familiar green and gold kangaroo logo to identify the origin of the product as Australian;
- A gold shaded bar chart identifying the proportion of Australian-sourced ingredients;
- Text on the proportion of Australian-sourced ingredients that aligns with the bar chart.
However the draft framework raises new concerns for any seller of foods in or for Australia:
1. Increased role for the ACCC: The proposed removal of the existing country of origin labelling requirements (Standard 1.2.11) from the Australia New Zealand Food Standards Code (‘Food Standards Code’), and reworking them within the Australian Consumer Law as an Information Standard for Country of Origin Labelling for Food (‘Information Standard’) will have the effect of increasing the Australian Consumer and Competition Commission’s (‘ACCC’) role as a regulator in relation to food products. The ACCC can be expected to pursue and penalise any food business it deems to be misleading or deceptive with non-compliant origin claims.
2. Reduced accountability and transparency: Under section 134 of the Australian Consumer Law (which is set out in Schedule 2 of the Australian Competition and Consumer Act), the responsible Federal Minister (currently the Minister for Industry as at the date of writing) is empowered to issue any ‘Information Standard’ that “regulates the type and amount of information provided to consumers about goods”.
The new ‘Information Standard’ for country of origin labelling of food is the first time this route for by-passing Parliament’s law-making function is to be used. The new legal framework is, in effect, a law that can be unilaterally changed by a single ministerial fiat.
Most food companies have had little time to engage during the designated consultative time-frame for the release of the documents in December through to 29 January 2016. This coincided with Australia’s long summer vacation period.
It appears that any submissions made by food businesses are also not being made public prior to enforceability of the new laws. It is our understanding that submissions are to be considered by the civil servants authoring the final ‘Regulatory Impact Statement’ (RIS), “who will weigh up all submissions, analyse the economic and regulatory impact of the proposed Information Standard, and make a final recommendation to the Minister. However the RIS, including its reasoning and whether any weight is given to industry submissions, will only be made available after the Information Standard is made enforceable.”
3. Increased cost of regulatory compliance: The extra costs for the food industry caused by new CoOL requirements follows closely on the back of the Health Claims Standard law and involves another major packaging overhaul for many food businesses.
Extra regulatory costs are certain to be incurred for Australian food producers because of the new CoOL law. This is because the new laws will divert financial and staff resources into determining the composition breakdown for each product, require legal advice to ensure labels are compliant; and substantial re-design costs for packaging to accommodate the new labels, will be incurred.
4. Ambiguities for determining ‘significant ingredients’: Under the previous ‘safe harbour’ defences for ‘Product of Australia’ claims, a food business could only support such a claim if Australia was the country of origin for each ‘significant ingredient’.
The proposed draft laws do not adequately solve problems with the concept of ‘significant ingredient’. Adverse consequences are likely to occur because: (1) The legislative purpose of the reforms, to simplify regulatory compliance for food businesses, will not be achieved; (2) the ambiguity caused by overlaps in the prescriptive descriptions of ingredients to be ‘significant’ will cause difficulties for self-substantiation of many CoOL claims, percentage inputs of ingredients and variabilities. This will create likely non-compliances.
5. Labelling inflexibility with variable or seasonal supplies of ingredients: The requirement to make a definitive claim as to the percentage of ingredients in the product is particularly onerous on businesses with a variable or seasonal supply chain. On any given product batch, the percentage of Australian sourced ingredients may change – suppliers may change, weather conditions may impact a growing area, and ingredient shortfalls to be covered by imported food.
Are food companies expected to carry several contingent packing lines? Why won’t scannable QR-Code or barcode apps suffice?
This problem is exacerbated for businesses that pre-purchase bulk packaging as a cost saving measure, since origin claims as to percentage of Australian ingredients will certainly become inaccurate, false or misleading.
6. What’s wrong with voluntary, premium origin declarations? It has always been open for any Australian-based food supplier to identify its product as ‘Australia-grown’ or ‘Australia-made’ when the raw ingredient is sourced in Australia. The same applies in New Zealand, which does not impose mandatory CoOL but encourages voluntary CoOL by NZ food suppliers.
If it costs more to label food as locally grown in Australia, the food supplier making such a voluntary claim is doing so on the basis that its locally grown produce is able to command a price premium for being more attractive to consumers as a local product. In other words, in a fair market, consumers can be attracted to the product with local ingredients once it is identifiable by a voluntary claim of its local origin.
So why make CoOL mandatory?
One answer, and an important concern with voluntary CoOL, is that large retailers that import their house-brand products might not want to identify when a food product has been processed or packaged in a foreign country (e.g. some consumer surveys have shown that Australians are hesitant to buy imported foods made or packaged in China).
However Australia’s existing Commerce (Imports) Regulations clearly specify that the country of origin of imported products must be identified. This law could have been tightened or matched by similar laws within the Food Standards Code in relation to retail products.
For products just with ingredients sourced in Australia, the government could have imposed an obligation on large retailers requiring the specifics of the extent of Australian-sourced and imported ingredients on house-brands without adversely impacting every other food supplier.
This is general information rather than legal advice and is current as of 4 Feb 2016. We therefore recommend you seek legal advice for your particular circumstances if you want to rely on advice or information to be a basis for any commercial decision-making by you or your business.